Solomon Lew's Premier Investments in big profit lift

Premier Investments' bold expansion of the Smiggle stationery chain in Britain is paying off, with the group's 42 Smiggle stores trading significantly ahead of budget as British parents and youngsters shell out with gusto for bright pencil cases, backpacks and trinkets.

Premier's retail operations, which also include fashion stores Just Jeans, Jay Jays and Portmans, and sleepwear group Peter Alexander, have delivered a strong first-half result, with net profit up 26 per cent to $71.5 million.

Premier chairman, billionaire Solomon Lew, said all seven retail brands in the stable, which also includes Dotti and Jacqui E, had generated positive same-store sales growth. Overall, the like-for-like sales, which strips out the impact of new store openings, increased by 6.9 per cent. Total sales revenue was up 15.1 per cent to $565 million. Mr Lew said Smiggle was on course to be a global business and would be successful wherever there were children.

"The world is the big prize. It's going to be a world brand," he said on Friday.

Online sales across the group were up 48 per cent, outstripping the pace of online sales by rivals in the broader market. Premier's chief executive Mark McInnes, the former David Jones boss who has been at the helm of Premier's retail operations since 2011, said the company was aiming to reach $100 million in online sales by 2020.

Premier is seeking to replicate the success of Smiggle in Australia in Britain and has ambitious growth plans, aiming to have 70 stores open in Britain by July and 100 by Christmas. Total Smiggle sales were up 46.5 per cent in the six months ended January 30. Mr McInnes said the first half was always a better half for Smiggle because of the school holidays in August and September in Britain, and then a strong Christmas and school holiday period in January.

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Better than expected

"It is going much better than expectations," Mr McInnes said on Friday. He said the company was very disciplined in choosing the right sites in Britain.

"We are uncompromising on all sites. We walk every shopping centre, every site. That is the critical success factor." He said between 10 to 15 of the British Smiggle stores were in the top 20 across the entire chain, outclassing most of the Australian stores. Mr McInnes said the same products were being sold in Smiggle stores in Britain, Australia and Asia. "It's perfectly aligned from a product perspective," Mr McInnes said.

Premier lifted its interim dividend to 23¢, from 21¢ a year ago, and it will be paid on May 17. Premier paid a special dividend this time last year but Mr Lew said the firm was keeping its powder dry for expansion opportunities. "When you're looking for expansion opportunities, you want to keep as much cash up your sleeve as possible," Mr Lew said.

The net profit result was substantially ahead of consensus forecasts, about $63.9 million. The Premier first half had a slight benefit because there was one extra trading week in this half, compared with a year ago. Citigroup's analyst Craig Woolford described it as a "very strong result reflecting both Smiggle's traction and good results in Portmans".

Premier Investments shares have risen about 24 per cent in the past 12 months, from $11.83 to $14.71 prior to the result. The shares gained 2 per cent on Friday morning to about $15.

Mr McInnes said the company had kept costs under control through a disciplined approach to labour, rents and inventory management. "Smiggle UK is a standout, performing above our expectations," Mr McInnes said.

We continue to believe that Smiggle has the potential to become a truly global brand.

Billionaire Solomon Lew

Mr Lew's personal wealth is estimated at $2 billion, which puts him at No. 17 in the BRW Rich List.